Ly, Tidiane 2019 This paper studies local governments' public policies in a metropolitan area plagued by traffic congestion, where both residents and workers consume local public goods. We develop a new spatial sub-metropolitan tax competition model which features a central city surrounded by suburban towns linked by mobile capital and mobile residents who commute to work. We show that Pareto-efficiency is achieved if towns can retain their workers using labor subsidies. Otherwise, traffic congestion in the city is inefficiently high and local governments respond by setting inefficient public policies: (1) the city over-taxes capital and under-taxes residents, which leads to too little capital and too many residents in the city; (2) local public goods are under-provided in the city and over-provided in the towns. application/pdf https://localhost:5000/ark:/12658/srd1319074 https://susi.usi.ch/global/documents/319074 https://susi.usi.ch/documents/319074/files/wp1903.pdf eng info:eu-repo/semantics/altIdentifier/ark/12658/srd1319074 info:eu-repo/semantics/openAccess License undefined Tax competition Urban economics Traffic congestion Public goods Mobility info:eu-repo/classification/udc/33 Taxes, traffic jam and spillover in the metropolis http://purl.org/coar/resource_type/c_816b